Renuka Sugars in talks for 28% cut in Equipav buyout price

BANGALORE: Shree Renuka Sugars (SRS) is negotiating a 25-28% reduction in the acquisition price for its proposed Equipav buyout. SRS will now pay anywhere between Rs 1,100 crore and Rs 1,150 crore against the earlier price of Rs 1,530 crore for Brazil’s seventh-largest sugar refiner. The SRS management, however, was not available for a confirmation about the re-negotiation.

The Indian firm had announced plans to acquire Equipav in February last. The buyout would have seen SRS pay Rs 1,530 crore besides assuming Equipav’s debt of nearly $700 million. However, the fall in global sugar prices, on the back of news of higher production in India and Brazil, forced SRS to re-negotiate the price.

August white sugar prices in London had, for instance, gone past the $685 per tonne mark but are currently trading at about $459.7 per tonne, indicating a fall of 33%.

“The sugar industry hit a bad patch with the collapse in global prices. Most of the sugar company stocks have fallen. The management could have sought a higher haircut in the price though a 25-28% is definitely welcome. There should be a rise in sugar prices on technical grounds,” said a sugar analyst with one of the large broking firms requesting anonymity.

SRS, which is the country’s largest sugar refiner, paid $240 million to acquire another Brazilian sugar company VDI. This provided the company with a cane crushing capacity of 3 million tonne. With the Equipav acquisition in its pocket, SRS should have a cane crushing capacity of over 10 mt. The report of SRS re-negotiating the Equipav price gave its stock a leg up on BSE where the scrip closed up 4.6% at Rs 63.65.

source: ET